Virco(VIRC) - 2023 Q3 - Quarterly Report

Financial Performance - For the three months ended October 31, 2022, the company reported a pre-tax income of $8,194,000 on sales of $77,395,000, compared to a pre-tax income of $1,620,000 on sales of $57,331,000 in the prior year, representing a sales increase of approximately 35.0%[95][96] - For the nine-month period ended October 31, 2022, the company earned a pre-tax profit of $12,803,000 on sales of $192,276,000, a 32.9% increase in sales compared to the prior year[103] Orders and Inventory - Year-to-date, the company experienced a 6.7% increase in orders compared to the same period last year, with a 15.9% decrease in orders during the quarter ended October 31, 2022 compared to the same period last year[89] - Inventory increased by $16,982,000 at October 31, 2022 compared to October 31, 2021, with approximately 11% of the increase attributed to valuation from increased material and labor costs[110] Margins and Expenses - Gross margin for the third quarter ended October 31, 2022 was 39.8% of sales, up from 35.4% in the prior year, driven by price increases implemented to recover increased costs[97] - Selling, general and administrative expenses for the three months ended October 31, 2022 increased by approximately $4,195,000 but decreased as a percentage of sales to 28.4% compared to 31.0% in the prior year[98] Financial Obligations and Taxation - Interest expense increased by $240,000 for the three months ended October 31, 2022, primarily due to an increase in the amount borrowed to finance seasonal working capital[100] - The effective income tax rate for the three months ended October 31, 2022 was 3.9%, down from 18.2% in the prior year, due to the recording of a valuation allowance for federal deferred tax assets[101] Compliance and Risks - The company believes it will maintain compliance with its financial covenants under its credit agreement, despite ongoing risks related to economic conditions and supply chain challenges[114] - Key risks include availability of funding for educational institutions, material costs, labor costs, product demand, competitive conditions, and general economic conditions[118] Capital Expenditures - Capital expenditures for the nine months ended October 31, 2022 were $2,716,000, financed through the company's credit facility and operating cash flow[111] Forward-Looking Statements - The Company has made forward-looking statements regarding its performance and market conditions, which are subject to risks and uncertainties[118] - The Company is classified as a smaller reporting company and is not required to provide detailed market risk disclosures[120]